Nuance Issues Preliminary Second Quarter Fiscal 2012 Financial Results08:01 EDT Thursday, April 26, 2012
BURLINGTON, Mass. (Business Wire) -- Nuance Communications, Inc. (Nasdaq: NUAN) today announced preliminary
revenue and EPS results for the second quarter fiscal 2012, ended March
31, 2012.
Based on preliminary financial data, Nuance expects Q2 12 non-GAAP
revenues between $416 million and $418 million; GAAP revenues between
$389 million and $391 million; non-GAAP net income between $0.42 and
$0.43 per diluted share; and GAAP net income between $0.00 and $0.01 per
diluted share. The preliminary financial results are subject to revision
until the Company reports final Q2 12 results on May 10, 2012.
“A balanced performance across our markets enabled us to deliver 14%
year-over-year organic revenue growth,” said Tom Beaudoin, chief
financial officer at Nuance. “We were pleased to see a strong
contribution from our Enterprise business.”
On February 9, 2012, Nuance provided initial guidance for Q2 12 of
non-GAAP revenues between $395 and $415 million; GAAP revenues between
$371 and $391 million; non-GAAP EPS between $0.36 and $0.40; and GAAP
EPS between ($0.07) and ($0.03).
Nuance to Host Second Quarter Conference Call on May 10, 2012
The Company will release results for its fiscal second quarter ended
March 31, 2012, after the market close on Thursday May 10, 2012. Nuance
will provide a copy of prepared conference call remarks in combination
with its press release. This process and these remarks are offered to
provide shareholders and analysts additional time and detail for
analyzing Nuance's results. The remarks will be available at www.nuance.com/earningsresults
in conjunction with the press release.
The conference call will begin at 5:00 p.m. ET and will include only
brief comments followed by questions and answers. The prepared remarks
will not be read on the call. To access the live broadcast, please visit
the Investor Relations section of Nuance's Website at www.nuance.com.
The call can also be heard by dialing (800) 553-0358 or (612) 332-0632
at least five minutes prior to the call and referencing code 245812. A
replay will be available within 24 hours of the announcement by dialing
(800) 475-6701 or (320) 365-3844 and using the access code 245812.
About Nuance Communications
Nuance Communications, Inc. (NASDAQ: NUAN) is a leading provider of
voice and language solutions for businesses and consumers around the
world. Its technologies, applications and services make the user
experience more compelling by transforming the way people interact with
devices and systems. Every day, millions of users and thousands of
businesses experience Nuance's proven applications. For more
information, please visit www.nuance.com.
Safe Harbor and Forward-Looking Statements
Statements in this document regarding Nuance's preliminary Q2 12 revenue
and EPS results, performance across its markets, and the strong
contribution from its Enterprise business constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Any statements that are not statements of historical
fact (including statements containing the words “believes,” “plans,”
“anticipates,” “expects,” or “estimates” or similar expressions) should
be considered to be forward-looking statements. There are number of
important factors that could cause actual results or events to differ
materially from those indicated by such forward-looking statements,
including: fluctuations in demand for Nuance's existing and future
products; economic conditions in the United States and abroad; Nuance's
ability to control and successfully manage its expenses and cash
position; the effects of competition, including pricing pressures;
possible defects in Nuance's products and technologies; the ability of
Nuance to successfully integrate operations and employees of acquired
businesses; the ability to realize anticipated synergies from acquired
businesses; and other factors described in Nuance's annual report on
Form 10-K for the fiscal year ended September 30, 2011 and Nuance's
quarterly report on Form 10-Q filed with the Securities and Exchange
Commission. Nuance disclaims any obligation to update any
forward-looking statements as a result of developments occurring after
the date of this document.
The information included in this press release should not be viewed as a
substitute for full GAAP financial statements.
Discussion of Non-GAAP Financial Measures
Management utilizes a number of different financial measures, both GAAP
and non-GAAP, in analyzing and assessing the overall performance of the
business, for making operating decisions and for forecasting and
planning for future periods. Our annual financial plan is prepared both
on a GAAP and non-GAAP basis, and the non-GAAP annual financial plan is
approved by our board of directors. Continuous budgeting and forecasting
for revenue and expenses are conducted on a consistent non-GAAP basis
(in addition to GAAP) and actual results on a non-GAAP basis are
assessed against the annual financial plan. The board of directors and
management utilize these non-GAAP measures and results (in addition to
the GAAP results) to determine our allocation of resources. In addition
and as a consequence of the importance of these measures in managing the
business, we use non-GAAP measures and results in the evaluation process
to establish management's compensation. For example, our annual bonus
program payments are based upon the achievement of consolidated non-GAAP
revenue and consolidated non-GAAP earnings per share financial targets.
We consider the use of non-GAAP revenue helpful in understanding the
performance of our business, as it excludes the purchase accounting
impact on acquired deferred revenue and other acquisition-related
adjustments to revenue. We also consider the use of non-GAAP earnings
per share helpful in assessing the organic performance of the continuing
operations of our business. By organic performance we mean performance
as if we had owned an acquired business in the same period a year ago.
By continuing operations we mean the ongoing results of the business
excluding certain unplanned costs. While our management uses these
non-GAAP financial measures as a tool to enhance their understanding of
certain aspects of our financial performance, our management does not
consider these measures to be a substitute for, or superior to, the
information provided by GAAP revenue and earnings per share. Consistent
with this approach, we believe that disclosing non-GAAP revenue and
non-GAAP earnings per share to the readers of our financial statements
provides such readers with useful supplemental data that, while not a
substitute for GAAP revenue and earnings per share, allows for greater
transparency in the review of our financial and operational performance.
In assessing the overall health of the business during the three and six
months ended March 31, 2012 and 2011, and, in particular, in evaluating
our revenue and earnings per share, our management has either included
or excluded items in six general categories, each of which are described
below.
Acquisition-Related Revenue and Cost of Revenue.
The Company provides supplementary non-GAAP financial measures of
revenue, which include revenue related to acquisitions, primarily from
Loquendo, Equitrac and eCopy for the three and six months ended March
31, 2012, that would otherwise have been recognized but for the purchase
accounting treatment of these transactions. Non-GAAP revenue also
includes revenue that the Company would have otherwise recognized had
the Company not acquired intellectual property and other assets from the
same customer. Because GAAP accounting requires the elimination of this
revenue, GAAP results alone do not fully capture all of the Company's
economic activities. These non-GAAP adjustments are intended to reflect
the full amount of such revenue. The Company includes non-GAAP revenue
and cost of revenue to allow for more complete comparisons to the
financial results of historical operations, forward-looking guidance and
the financial results of peer companies. The Company believes these
adjustments are useful to management and investors as a measure of the
ongoing performance of the business because, although we cannot be
certain that customers will renew their contracts, the Company
historically has experienced high renewal rates on maintenance and
support agreements and other customer contracts. Additionally, although
acquisition-related revenue adjustments are non-recurring with respect
to past acquisitions, the Company generally will incur these adjustments
in connection with any future acquisitions.
Acquisition-Related Costs, Net.
In recent years, the Company has completed a number of acquisitions,
which result in operating expenses which would not otherwise have been
incurred. The Company provides supplementary non-GAAP financial
measures, which exclude certain transition, integration and other
acquisition-related expense items resulting from acquisitions, to allow
more accurate comparisons of the financial results to historical
operations, forward-looking guidance and the financial results of less
acquisitive peer companies. The Company considers these types of costs
and adjustments, to a great extent, to be unpredictable and dependent on
a significant number of factors that are outside of the control of the
Company. Furthermore, the Company does not consider these
acquisition-related costs and adjustments to be related to the organic
continuing operations of the acquired businesses and are generally not
relevant to assessing or estimating the long-term performance of the
acquired assets. In addition, the size, complexity and/or volume of past
acquisitions, which often drives the magnitude of acquisition-related
costs, may not be indicative of the size, complexity and/or volume of
future acquisitions. By excluding acquisition-related costs and
adjustments from our non-GAAP measures, management is better able to
evaluate the Company's ability to utilize its existing assets and
estimate the long-term value that acquired assets will generate for the
Company. The Company believes that providing a supplemental non-GAAP
measure which excludes these items allows management and investors to
consider the ongoing operations of the business both with, and without,
such expenses.
These acquisition-related costs are included in the following
categories: (i) transition and integration costs; (ii) professional
service fees; and (iii) acquisition-related adjustments. Although these
expenses are not recurring with respect to past acquisitions, the
Company generally will incur these expenses in connection with any
future acquisitions. These categories are further discussed as follows:
(i) Transition and integration costs. Transition and integration
costs include retention payments, transitional employee costs, earn-out
payments treated as compensation expense, as well as the costs of
integration-related services provided by third parties.
(ii) Professional service fees. Professional service fees include
third party costs related to the acquisition, and legal and other
professional service fees associated with disputes and regulatory
matters related to acquired entities.
(iii) Acquisition-related adjustments. Acquisition-related
adjustments include adjustments to acquisition-related items that are
required to be marked to fair value each reporting period, such as
contingent consideration, and other items related to acquisitions for
which the measurement period has ended, such as gains or losses on
settlements of pre-acquisition contingencies.
Amortization of Acquired Intangible Assets.
The Company excludes the amortization of acquired intangible assets from
non-GAAP expense and income measures. These amounts are inconsistent in
amount and frequency and are significantly impacted by the timing and
size of acquisitions. Providing a supplemental measure which excludes
these charges allows management and investors to evaluate results
“as-if” the acquired intangible assets had been developed internally
rather than acquired and, therefore, provides a supplemental measure of
performance in which the Company's acquired intellectual property is
treated in a comparable manner to its internally developed intellectual
property. Although the Company excludes amortization of acquired
intangible assets from its non-GAAP expenses, the Company believes that
it is important for investors to understand that such intangible assets
contribute to revenue generation. Amortization of intangible assets that
relate to past acquisitions will recur in future periods until such
intangible assets have been fully amortized. Future acquisitions may
result in the amortization of additional intangible assets.
Costs Associated with IP Collaboration Agreement.
In order to gain access to a third party's extensive speech recognition
technology and natural language and semantic processing technology,
Nuance has entered into three IP collaboration agreements, with terms
ranging between five and six years. Depending on the agreement, some or
all intellectual property derived from these collaborations will be
jointly owned by the two parties. For the majority of the developed
intellectual property, Nuance will have sole rights to commercialize
such intellectual property for periods ranging between two to six years,
depending on the agreements. For non-GAAP purposes, Nuance considers
these long-term contracts and the resulting acquisitions of intellectual
property from this third-party over the agreements' terms to be an
investing activity, outside of its normal, organic, continuing operating
activities, and is therefore presenting this supplemental information to
show the results excluding these expenses. Nuance does not exclude from
its non-GAAP results the corresponding revenue, if any, generated from
these collaboration efforts. Although the Company's bonus program and
other performance-based incentives for executives are based on the
non-GAAP results that exclude these costs, certain engineering senior
management are responsible for execution and results of these
collaboration agreements and have incentives based on those results.
Non-Cash Expenses.
The Company provides non-GAAP information relative to the following
non-cash expenses: (i) stock-based compensation; (ii) certain accrued
interest; and (iii) certain accrued income taxes. These items are
further discussed as follows:
(i) Stock-based compensation. Because of varying available
valuation methodologies, subjective assumptions and the variety of award
types, the Company believes that the exclusion of stock-based
compensation allows for more accurate comparisons of operating results
to peer companies, as well as to times in the Company's history when
stock-based compensation was more or less significant as a portion of
overall compensation than in the current period. The Company evaluates
performance both with and without these measures because compensation
expense related to stock-based compensation is non-cash and the options
and restricted awards granted are influenced by the Company's stock
price and other factors such as volatility that are beyond the Company's
control. The expense related to stock-based awards is generally not
controllable in the short-term and can vary significantly based on the
timing, size and nature of awards granted. As such, the Company does not
include such charges in operating plans. Stock-based compensation will
continue in future periods.
(ii and iii) Certain accrued interest and income taxes. The
Company also excludes certain accrued interest and certain accrued
income taxes because the Company believes that excluding these non-cash
expenses provides senior management, as well as other users of the
financial statements, with a valuable perspective on the cash-based
performance and health of the business, including the current near-term
projected liquidity. These non-cash expenses will continue in future
periods.
Other Expenses.
The Company excludes certain other expenses that are the result of
unplanned events to measure operating performance and current and future
liquidity both with and without these expenses; and therefore, by
providing this information, the Company believes management and the
users of the financial statements are better able to understand the
financial results of what the Company considers to be its organic,
continuing operations. Included in these expenses are items such as
restructuring charges, asset impairments and other charges (credits),
net. These events are unplanned and arose outside of the ordinary course
of continuing operations. These items also include adjustments from
changes in fair value of share-based instruments relating to the
issuance of our common stock with security price guarantees payable in
cash.
The Company believes that providing the non-GAAP information to
investors, in addition to the GAAP presentation, allows investors to
view the financial results in the way management views the operating
results. The Company further believes that providing this information
allows investors to not only better understand the Company's financial
performance, but more importantly, to evaluate the efficacy of the
methodology and information used by management to evaluate and measure
such performance.
Financial table follows
Nuance Communications, Inc.
Reconciliation of Supplemental Financial Information
GAAP and non-GAAP Revenue and Net Income per Share Guidance
(in thousands, except per share amounts)
Unaudited
Three months ended
March 31, 2012
Low
High
GAAP revenue
$
389,000
$
391,000
Acquisition-related adjustment - revenue
27,000
27,000
Non-GAAP revenue
$
416,000
$
418,000
GAAP net income per share
$
0.00
$
0.01
Acquisition-related adjustment - revenue
0.08
0.08
Acquisition-related adjustment - cost of revenue
(0.01
)
(0.01
)
Acquisition-related costs, net
0.05
0.05
Cost of revenue from amortization of intangible assets
0.04
0.04
Amortization of intangible assets
0.07
0.07
Non-cash stock-based compensation
0.11
0.11
Non-cash interest expense
0.03
0.03
Non-cash income taxes
0.02
0.02
Costs associated with IP collaboration agreements
0.02
0.02
Restructuring and other charges, net
0.01
0.01
Change in fair value of share-based instruments
(0.00
)
(0.00
)
Non-GAAP net income per share
$
0.42
$
0.43
Shares used in computing GAAP and non-GAAP net income per share:
Weighted average common shares: basic
305,300
305,300
Weighted average common shares: diluted
322,700
322,700
For InvestorsNuance Communications, Inc.Kevin
Faulkner,408-992-6100kevin.faulkner@nuance.comorFor
Press and InvestorsRick Mack, 781-565-5000richard.mack@nuance.com

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